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eLearning: Are We Making Money?

07/21/05

Maybe. But in online ed, what do we mean by "making money?"

NOT LONG AGO, a highly publicized report suggested that the
eLearning boom had gone bust. The report, Thwarted Innovation: What Happened
to e-Learning and Why (Zemsky and Massey, University of Pennsylvania,
2004 (www.irhe.upenn.edu/WeatherStation.html),
took a hard stance. Another finding suggested that the “bust” was
possibly a natural milestone in the process of innovation, and was only a bust
due to the overly rigid and unimaginative applications of the online technologies.
The study predicted that the next boom would happen when online programs used
“flexible combinations” of people, facilities, and technology to
meet learner-centered career and lifestyle goals. This is happening now.

The next wave of the eLearning innovation is in progress and, according to
some, is succeeding in paying its own way. Programs portending the potential
for a boom in online learning within traditional institutions of higher learning
are those at Boston University (butrain.bu.edu/cpe),
Penn State University (www.worldcampus.psu.edu),
the University of Florida (www.doce.ufl.edu),
the University of Illinois (www.online.uillinois.edu),
and the University of Massachusetts (www.umassonline.net).
Collectively, these institutions offer over 100 online undergraduate and graduate
degrees, certificates, and programs in fields as diverse as financial planning,
homeland security, pharmacology, forensic toxicology, business, and philosophy.

These institutions are using a variety of models to design and deliver their
programs. The models reveal differences in how schools fund their initial programs,
in their strategies for designing and developing programs, and in the processes
for branding and marketing them.

Interviews with the leaders of the programs revealed many similar characteristics,
as well. For example, each of these online programs is administered as a cost
center within its institution. When asked whether the Penn State World Campus
was making money, Associate VP for Outreach Gary Miller shared that the university’s
goal for the World Campus is to “recover the cost of delivering any program
and, where possible, to develop a positive cash flow.” Positive cash flow
(when it happens) is used to support courses that don’t cover costs, to
provide funds for innovation and updating of programs, and to share revenue
with the sponsoring academic units. This, too, is the message from the other
institutions; each is thriving with steadily increasing enrollment and revenues.
Yet, the characteristics of these successful online programs echo those of any
successful economic endeavor.

Start-up Funding

The institutions profiled here require that their online learning divisions
be self-supporting and self-sustaining, yet start-up money (venture capital)
has been essential for launching the programs. Boston University, for one, initially
partnered with an external for-profit company for design and development of
a financial planning course, in return for a percentage of tuition fees. That
partnership enabled a shared-risk scenario: BU could invest in the content development
and repackaging of the program for online delivery as well as the infrastructure
to provide the necessary student services. Penn State and the University of
Illinois Online both received grant support from the Alfred P. Sloan Foundation.
And UMassOnline received internal capital from a university fund.

To ensure that an online program can be successfully launched and is self-sustainingover
time, Bill Riffee, head of the University of Florida Distance, Continuing and
Executive Education program, uses scaling criteria to help determine whether
or not to offer a program: Can the program grow large enough (200 to 250 students)
to support revenue-sharing with the colleges? Can it be self-sustaining in two
to three years? This often means ensuring that a cash reserve is available to
support a program as it is getting launched. One of the earliest programs launched
at the University of Florida is the professional Doctor of Pharmacy program
that consistently has over 500 students.

External and Internal Partners

Another shared characteristic of these online programs is that they
do not try to do everything themselves. Each institution partners with other
internal and external groups, as needed. For the production of courses, some
institutions partner with groups such as instructional designers and developers.
Others contract out market research and marketing, an expertise not easily found
within higher ed. Still others work with partners to develop a substantive “branding”
of their online entity. Most institutions use a course management system such
as WebCT (www.webct.com)
for their delivery infrastructure and to support student services.

In the early years of the online program at Boston University, John Ebersole,
associate provost and dean of Extended Education, says that his team partnered
on the development of both degree and professional development programs. On
the academic side, BU’s online program has partnered with Embanet (www.embanet.com)
on master degrees in Criminal Justice, Occupational Therapy and Management,
and for a doctoral degree in Physical Therapy. In professional development,
BU partnered with Acadient (www.acadient.com)
for its popular financial planning course. Extended universities are now developing
courses themselves and working with third parties for marketing help. In the
academic degree area at BU, the largest and oldest online program is a master’s
degree in Criminal Justice, with about 500 students.

Relationship to the Academic
Units

The faculty and deans at each of these institutions are heavily involved in
the launch, design, development, and delivery of online programs. David Gray,
CEO of UMassOnline, believes one reason for that program’s success is
that “we have built the structure inside the university, not as an appendage
outside the university.” This means that courses are taught predominantly
by regular permanent faculty, and that adjuncts, when used, are under the supervision
of the regular faculty. In this model, the deans and faculty are partners with
the UMassOnline center.

Still, there are exceptions, and differences between academic degrees such
as the master’s and professional degrees and those programs designed for
certification and skill-focused programs. The financial planning program at BU is self-paced, facilitated by grad students with access to a subject-matter tutor. These subject-matter facilitators provide a personalized support system for learners. (www.edpath.com, 10-04 issue)

When they participate in online programs, traditional college deans and faculty
benefit from the revenue-sharing with the colleges. Most online institutions
retain a portion of the tuition for the shared services such as the delivery
infrastructure, student support, and marketing. Revenue-sharing helps to provide
a common incentive among all program partners, particularly as university budgets
are stretched.

Programmatic Notes

The majority of successful online programs
target career professionals who are searching for degrees and certificates to
further their careers. In response to these needs, online programs in areas
such as business, health professions, engineering, agriculture, criminal justice,
information studies, and technology are abundant. But, institutions are now
branching out into surprising areas—the “lifelong learning”
areas that we predicted in the first boom of online learning. The University
of Florida, for one, offers a master’s degree in Latin which is currently
at capacity, and in 2004, U of I Online announced a program leading to a BA
in Philosophy.

eLearning as a Business

The similarities between a start-up business and these online institutions
are hard to miss: The need for start-up and reserve capital, partners, outsourcing,
and contracted expertise and services are typical economic success criteria.
The next phase of growth? Extensions to the global market. The University of
Florida may be the most progressive in this area, partnering with Brazil, Germany,
Peru, Ecuador, Thailand, Scotland, and Australia for programs in pharmacology,
forensic sciences, and audiology.

Are we making money yet in online learning in higher education? “Yes”
may not be appropriate, but in certain pockets and in certain programs, the
answer is a cautiously optimistic “Absolutely!” Sustaining the revenue
over the long term, and over the range of programs needed by learners for careers
and life-long learning, are challenges to come.